4.
The nation has experienced a very deep recession,
extending over six quarters …….
Source: ONS, UK Output, Income & Expenditure, February 2010
Notes: Q4 2009 GDP was revised up from +0.1% up to 0.4%; Q1 2010 up from 0.2% to 0.3%
Estimates of the recession have been revised downwards from 6% to 6.3%.
3

6.
The West Midlands has seen the sharpest drop in
output of all the English regions over the last year....
PMI Output (12-month average) PMI Output (seasonally adjusted)
60
West Midlands
PMI Index (50 = no change on previous month)
Yorkshire & 55
Humber
East Midlands 50
South East
45
East England
40
South West
North East 35
North West UK
30
West Midlands
London
25
40 45 50 55
PMI (50 = no change on previous month)
Source: Markit Economics / AWM February 2010
5

7.
And for much of the recession the region has seen some of
the highest rates of unemployment, peaking at over 10%
Source: ONS Labour Market Statistics, March 2010
6

8.
Whilst the level of notified redundancies has eased since
early 2009, since 2010 they have again begun to rise
Source: Jobcentre Plus, March 2010
7

14.
Regional GDP per head dropped dramatically in the early
1980s - stabilising - then deteriorating in the late 1990s....
Note: GDP and GVA data are NOT directly comparable
GDP = GVA + taxes on products - subsidies on products
Source: Office of National Statistics
13

15.
With the West Midlands experiencing the lowest average
annual growth in GVA per head (2000-2007) of any UK region
14

18.
And a significantly higher proportion of the working age
population without qualifications compared to the UK
Working Age Population with No Qualifications
30
% of working age population with
25
no qualifications
20
15
10
5
0
Source: Labour Force Survey, 2008
17

20.
Collectively this may help to explain why the region’s private
sector has the lowest proportion of ‘high-growth’ firms......
Proportion of businesses (10+employees) Proportion of manufacturing businesses
that are high-growth (2005-08) (10+ employees) that are high-growth (2005-08)
8 6
7
Percentage of manufacturing firms
5
6 UK % of all firms
Percentage of all firms
4 UK % of all manufacturing firms
5
4 3
3
2
2
1
1
0 0
Source: NESTA 2009 from the ONS Business structure database
High growth firms are defined by the OECD as a firm with an average employment
growth rate exceeding 20% per annum over a 3 year period and with 10 or more 19
employees at the start of the period.

21.
And why the region’s private sector has been contracting in
contrast to the position in all other UK regions
Source: Annual Business Inquiry
20

22.
Shift-share analysis suggests the private sector has created
74,500 fewer private sector jobs than statistically ‘expected’….
Source: Work Foundation / Annual Business Inquiry, 2009
Notes: Shift/share analysis is a technique used for retrospectively decomposing
employment change in a region. The shift-share model says that growth in the study area’s
employment is a function of: The study area’s share of national growth. The ‘industrial mix’
21
change in activities. And the ‘shift’ change of activities toward/ away from the study area.

25.
Forecasts for 2010 suggest growth of just over 1.2% with
commentators talking of a ‘jobless recovery’ .....
Average of Medium-Term Independent Forecasts “It is possible we will have a
3
quarter when GDP falls, but I
2.5 don’t think it will be a double dip.
I would be surprised if we go
Forecasts GDP Growth (%)
2
back to recession but I think
1.5 recovery will be bumpy and
1
fragile”
0.5
Kate Barker
0 Bank of England MPC, March 2010
2010 2011 2012 2013 2014
Source: HM Treasury, Forecasts for the UK Economy: a comparison of independent forecasts,
May 2010
24

26.
And there remains considerable uncertainty about the timing
and strength of recovery
GDP projection based on market interest rate  Recent improvements are still
expectations and £200 billion asset purchases
being boosted by remaining
stimulus measures
 Export recovery remains patchy
 Impact of public spending cuts
to come
 Financial institutions are
redressing their balance sheets,
with impacts on lending
 Many businesses are choosing
to save rather than invest due
to uncertain outlook
Source: Bank of England Inflation Report , May 2010
25

27.
A major uncertainty concerns the impact of cuts in public
spend set out in the Spending Review Framework
• Current UK deficit of 11.5% or £156bn
• Coalition appears likely to adopt a split of 80:20
– 20% tax rise possibly through rise in VAT
– 80% reduction in public spending
• Spending on health and overseas aid to be protected
• Will try to limit the impact on the most vulnerable in society
and on regions heavily dependent on the public sector
• Protect spending that generates high economic returns
• Estimated that UK public sector job losses of 725,000
• Equivalent to 13% of total public sector jobs (5.7 mn)
26

30.
As previously noted there are also concerns around
youth unemployment & those with low skills
Source: Department for Work & Pensions, Opportunity for All Indicators, 2007/08
29

31.
Looking forward it will be critical to assist private sector
growth (to fill the gap) & especially ‘high growth’ firms
• Most firms experience modest growth - the number which
decrease in size is similar to the number that increase
• Focus on high-growth companies is critical:
– represent just 6% of UK firms employing 10+ people
– account for more than half the growth in jobs
– The majority are at least 5 years old (ie. its not just about start-ups)
– Few start-ups experience high growth in their first 10 years
– Occur in ALL sectors of the economy
• Interventions that target firms with high growth potential are likely
to be more efficient than general support for all SMEs
• Focus on quality, not just quantity
Source: NESTA 2009
Note: The highest % of growth firms reflect trends in the economy &
30
are highest for financial & business services & lowest for manufacturing

33.
The organisational context for delivering regeneration
will also undergo significant change
• RDAs to be abolished in the Autumn
• LEPS will be Local Authority & Business led, covering :
– Employment and skills
– Transport and planning
– Regeneration (including physical regeneration)
– Some element of enterprise support (but relatively limited)
• The models for LEPS have not yet been detailed
• Not clear whether there will be full regional coverage
• None of the BIS functions RDAs currently perform seem
to fit into the LEP model
32